ESG entry points ESG entry points http://www.federatedinvestors.com/static/images/fhi/fed-hermes-logo-amp.png http://www.federatedinvestors.com/daf\images\insights\article\graduation-ceremony-small.jpg October 14 2021 October 19 2021

ESG entry points

Top 5 career paths in sustainability.

Published October 19 2021
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It wasn’t long ago that a career combining sustainability and business was unheard of. They were seen as polar opposites. Most climate advocates viewed banks and corporations as myopic, willing to do anything in the name of profit. Think of the movie “Wall Street” from 1987 with the famous “greed is good” speech forming a generational view of capitalism. Fast forward 20 years later to the documentary “An Inconvenient Truth,” which brought climate change to the attention of audiences.

Today, consumers are increasingly demanding green-oriented goods and services, and more people want to see their investments support environmental, social and governance (ESG) change. The result is that corporates can’t hire enough staff with skill sets—and mindsets—in both traditional finance and sustainability. Case in point: the number of Chief Sustainability Officers (CSOs) has exploded by more than 228%, from 29 in 2011 to 95 in 2021, according to a Weinreb Group survey published this year.

With that high demand, it’s not surprising that multiple entry points have arisen for recent graduates and professionals who want to drive a more sustainable future. Here are some of the career paths in this rapidly expanding space:

Corporate Sustainability

This is the department devoted to ESG efforts, usually headed by a CSO, it is here that companies form, manage and communicate their responsibility strategy. It also is the home for the evaluation of its material ESG risks and opportunities. This division often oversees the firm’s environmental footprint, works with human resources on human capital initiatives and organizes community engagement. There are many different positions which intersect with almost every business unit.

Consulting & Communications

You could have predicted the emergence of ESG advisory firms to help corporations trying to wrap their collective heads around sustainability. These consultants assist them in building the business practices that a corporate sustainability department offers, as well as managing the rapidly changing regulations, oversight and external communications.

Data Providers

Sustainable practice now involves big data. The lion’s share comes from third-party data providers like MSCI and Sustainalytics. An emerging area is the use of AI and machine learning, including natural language processing (NLP). Historically, ESG scores were primarily based on aggregating corporate disclosures, but the more sophisticated programs today hunt for text and tone to assess trending sentiment about a business. This offers those with strengths in computer science, statistics and data analytics a route to join the sustainability cause.  

Standards Setters

These are the nonprofits and regulatory organizations around the globe who are helping to standardize sustainability disclosure and reporting. This can be rewarding work as these groups are laying down the very framework for future policy and transparency with increasing government coordination.

Responsible Investing

The opportunities here vary, from working as an ESG analyst performing sustainability-oriented research to an engagement specialist on a stewardship team who actively meet directly with corporations. Portfolio managers and analysts are using ESG measurements to augment their due diligence and identify mispriced investment opportunities. It is here that Gordon Gekkos and the stereotype of Wall Street give way to those who are redefining long-term sustainable wealth creation.

This is not an exhaustive list and there is no single template to enter the broad field of sustainability. Many universities have developed ESG-oriented curriculum, business schools have created degree tracks and industry associations have created certifications that put you on the doorstep of what could be a very rewarding career.

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DISCLOSURES

Views are as of the date above and are subject to change based on market conditions and other factors. These views should not be construed as a recommendation for any specific security or sector.

Terminology such as “ESG integrated,” “sustainable” or “impact,” among other terms, is not uniformly defined across the industry. Investment managers may understand and apply ESG factors in different ways, and that the role those factors play in investment decisions also varies. Therefore, we recommend investors understand the role of ESG factors in a strategy to ensure that approach is consistent with their investment objectives. Like any aspect of investment analysis, there is no guarantee that an investment strategy that considers ESG factors will result in performance better than or equal to products that do not consider such factors. Investing and making buy-and-sell decisions that emphasize ESG factors carries the risk that, under certain market conditions, the fund or strategy may underperform those that do not incorporate such factors explicitly into the decision-making process. The application of ESG criteria may affect exposure to certain sectors or securities and may impact relative investment performance depending on whether such sectors or securities are generally in or out of favor in the market.

 

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